john l. grove college of business investment management … · 2017. 9. 14. · 2012 annual report....

ship.edu/business/imp

John L. Grove College of Business

Investment Management Program

2012 Annual Report

Mission StatementThe investment management program is aimed at

providing students with the skills, theory, and concepts, needed to become portfolio managers through a proactive

educational environment. The intent of the Investment Management Program (IMP) is to provide academic scholarships for the finance program in the future.

Table of Contents

Introduction .................................................................................................................................1Letter to Friends and Affiliates ....................................................................................................2Executive Summary ....................................................................................................................3

Investment Objective ..........................................................................................................................3Investment Strategy ...........................................................................................................................3Sector Allocation ................................................................................................................................3Portfolio Performance ........................................................................................................................3

Investment Philosophy and Process ............................................................................................4Investment Considerations .................................................................................................................4Valuation Analysis ..............................................................................................................................4Portfolio Monitoring ............................................................................................................................4Risk Controls ......................................................................................................................................4Investment Criteria .............................................................................................................................5

Sector Allocations .......................................................................................................................6Fund Performance .......................................................................................................................7

Top 5 Performing Stocks in 2012 ........................................................................................................7Top 10 Holdings as of December 31, 2012 ........................................................................................7Bottom 5 Performing Stocks in 2012 .................................................................................................7Risk-adjusted Performance .................................................................................................................8

Portfolio Holdings ................................................................................................................. 9-38Investment Management Program Portfolio ..............................................................................39

Investment Management Program 1

Introduction

IMP students at RISE 2013 (L to R): Top: Mike Pavusik, Evan Miller, Lance Shifflet, Cameron Forrey, Isabel Scott, Rachel Kocher, Nnaemeka Okoro, and Peter Rosenberg. Bottom: Greg Campbell, Dr. Bryant, Josh Rakvin, and Robert Watson

During the 2012-2013 semesters, the Investment Management Program (IMP) has provided us with the opportunity to learn more about investing firsthand and to put our collective knowledge to the test. We have had the privilege to act as managers for the IMP portfolio as we saw fit. In 2012, the IMP portfolio gained 13.76%, while the S&P 500 benchmark gained 16.00%. These gains are attributed to improvement in employment and the 2.2% increase in GDP. The changes we have made to our strategy should provide superior returns for classes that inherit the portfolio. This has been an invaluable experience, and we will carry on the knowledge that we have acquired as members of the IMP with us into our profes-sional careers.

During the first official meeting of the IMP class every semester, all students are split among four sub-groups: Accounting, Administra-tive, Redefining Investment Strategy Education (RISE) taskforce, and Public Relations. Each sub-group is responsible for specific tasks to keep the program’s daily operations running. The account-ing group is responsible for recording all transactions of the portfolio and the information for the fund. The administrative group handles the preparation of the annual report as well as details for the an-nual dinner. It is the responsibility of Public Relations to update the IMP display case in the John L. Grove College of Business building, help the SU Foundation in fundraising for the portfolio and other activities, advertise IMP for potential future members, and maintain relationships with the donors. The RISE group is in charge of preparing for the portfolio management competition at the RISE symposium at University of Dayton, Ohio each year.

The RISE symposium is an annual competition arena during, which our portfolio performance is evaluated and ranked along with other schools with similar programs and investing styles. During the 2012 trip to RISE, our class had the privilege to be one of few selected chapters to present our portfolio and investment strategy in front of a panel during the forum. We learned a lot from the experts at the panel discussions and breakout sessions, and received high praise from the professionals we presented to. It was an experience that defined the year for us.

Each student within the class acts as a fund manager, and is re-sponsible for daily monitoring assigned individual stocks based on the ten GICS sectors. All students are required to stay current with financial news and trends and to present possible investment opportunities to the class. Students are also required to present these stocks in a presentation form (Stock Worksheet, developed by the Fall 2010 class) and a criteria worksheet (developed by the Fall 2011 class), when new opportunities arise or to reevaluate our position in the securities. As a class, we are also responsible for constructing and maintaining a timeline to meet all deadlines and be prepared for various events throughout the year.

In 2012-2013, the Finance Advisory Council continued their dedication to this program. With their guidance and insight, IMP has evolved into a productive and valuable program. For further information on this program, including the IMP Handbook, visit the IMP website at: http://www.ship.edu/Business/IMP/.

2 Investment Management Program

April 20, 2013

Dear Stakeholders,

The Investment Management Program (IMP) of Shippensburg University, the Class of Spring 2013, is honored to present to you our 2012 portfolio performance, as well as provide you with an update of our progress thus far in 2013. The IMP class provided us the privilege to take the skills, theories and concepts learned in the classroom and apply them to manage a real-dollar portfolio for the Shippensburg University Foundation. The IMP class has spent a considerable amount of time analyzing and evaluating our portfolio to generate the highest return, because of the significant importance of this opportunity.

We would like to thank those that have made this opportunity possible, beginning with the SU Foundation and our corporate and individual investors. We would like to acknowledge and thank Mr. Frank Wisman, who made the original contribution to initiate the IMP portfolio. We would also like to thank the Provost, Dr. Barbara Lyman; the Grove College of Business Deans and profes-sors; and the Finance Advisory Council members for their support over the years. Their assistance funded our trip to the annual RISE Forum held at the University of Dayton, Ohio, where we presented the performance of the IMP portfolio. We would especially like to thank Chad Rakvin and Northern Trust for their generous donations this year.

In the following report, you will find the history of the IMP program, the investment objective and strategy, the philosophies and processes that guide this program, the performance summary for 2012 for the IMP portfolio, as well as the analysis for our current holdings.

Any comments, questions or suggestions that you may have are always welcomed and appreciated ([email protected]).

We are truly grateful for your continued help and support,

The Spring 2013 IMP Portfolio Managers

Letter to Friends and Affiliates

John L. Grove College of Business

Shippensburg University1871 Old Main DriveShippensburg, PA 17257-2299

www.ship.edu/business

Office: 717-477-1435Fax: 717-477-4003

[email protected]

A member of the Pennsylvania State System of Higher Education


Investment Objective x To achieve a risk-adjusted return higher than our blended

benchmarks, 80% S&P 500-20% Barclays Aggregate Bond Index, while also obtaining sustainable income from our invest-ments to achieve objectives of The Wisman Fund.

Investment Strategy x To attain a balanced fund by investing in stocks and bonds.

Our stock investments will include a balance of growth and value, while remaining risk averse, based on our opinion of the direction of the macro economy. Our bond investments will be attained through ETFs.

x We use a top-down analytical process for asset allocation and security selection. We start by looking at economic metrics and indicators combined with the current regulatory landscape. We then determine what asset classes (i.e. stocks, bonds, etc) have the highest potential of being undervalued. Our managers use this information to set target weights for each asset class.

x With an asset allocation model in place, the IMP fund manag-ers then begin to evaluate current investments and search for potential new investments. This involves a two-tiered strategy. One for fixed income and one for equities.

x Our strategy for selecting individual stocks starts with the security meeting a bare minimum 6 out of 10 criteria. These criteria measure the valuation, financial health, and potential growth of a stock. If a security meets 6 out of 10 criteria, our managers will perform a fundamental, qualitative, and techni-cal analysis to determine if it is undervalued intrinsically and relatively, if it is a good time to buy, and if the investment is a good fit in the portfolio.

Executive Summary x Our fixed income strategy involves analysis of the interest

rate cycle, as well as the yield curve. These two metrics give our managers the first clue on where to find the best yield. IMP selects ETFs that are comprised of asset classes with fixed income (i.e. Treasury bonds, corporate bonds, inflation-protected bonds, etc.), which IMP believes will provide a safe and substantial yield to accomplish the objectives of the Wisman Fund.

Sector AllocationIMP uses the following three criteria as constraints for its sector allocation within our equity portion of our portfolio (for detailed sector allocation see page 8).

1. No more than 10% of the portfolio may be invested in one particular stock

2. No more than 25% of the portfolio may be invested in one sector

3. When a sector reaches 50% above or below the benchmarks, this is used as a warning signal that a sector may be over or under weighted, which may cause unwanted risk

Portfolio Performance x The return of the IMP portfolio in 2012 was 13.76%, compared

to 16.00% for the S&P 500 and 9.46% for its benchmark.

Spring 2013 IMP Portfolio Managers (L to R): Top: Gregory Campbell, Lance Shifflett, Evan Miller, Nnaemeka Okoro, Peter Rosenberger, Cameron Forrey, Michael Pavusik, Joshua Rakvin, Robert Watson. Bottom: Dr. Sarah Bryant, Xinxin (Lily) Cheng, Isabel Scott, Rachel Kocher, Caitlin Guindon.


Investment Philosophy and ProcessThe investment objective of the IMP is to achieve a risk-adjusted return higher than our blended benchmarks, 80% S&P 500-20% Barclays Aggregate Bond Index, while also obtaining sustainable income from our investments to achieve objectives of The Wisman Fund.

The IMP portfolio management team uses a bottom up approach to identify valuable investment opportunities. We focus on undervalued stocks of multiple market capitalizations through a blend of growth and value stocks. Recently, we have been investing in fixed income securities to not only match our benchmark, but to also generate steady cash inflows.

Investment ConsiderationsWe consider investing in undervalued stocks of good companies that have sound business and financial fundamentals, as well as fixed income securities. Our investment considerations include the following:

Qualitative analysis suggests that the company has a sound busi-ness strategy.

x Securities

- Identifiable business strategy with a recognizable business model

- Strong competitive standing

- Insider holding

- Ability to weather economic downturns

- Institutional holding

- Recent news that involves said company

- Other miscellaneous factors: spending on research and development

x Fixed Income

- Macro environment

- Interest rate cycle

- Credit Risk

- Inflation Expectations

Valuation AnalysisWe consider buying stocks that are undervalued. A stock is under-valued if the intrinsic value estimate of the stock is higher than the current market price. We use the following valuation methods and resources to estimate intrinsic value of a stock.

x For input parameters of the models, we rely on financial esti-mates from various websites such as Zack’s, Morningstar, and Value-line.

x We also consider valuation ratios (P/E, P/B, PEG)

Portfolio MonitoringWe monitor our portfolio’s holdings on a constant basis. Each class analyst is assigned 1 to 3 securities. A detailed re-evaluation is needed if the following signals incur:

1. Fundamentals of the company are deteriorating. The fun-damentals of a company include, but are not limited to, the following: competitive position within an industry, product innovation, operating efficiency, pricing (leader or follower), any patents, the quality of management, mergers, mission statement, public relations, and filing of quarterly reports

2. Better investment alternative is found

3. Decline in EPS quarter to quarter

4. Stock drops 10% over time from the initial purchase price, then a presentation will be made to update managers on the status of the company and the stock. At a 20% drop from the initial purchase price, the stock will be automatically sold. Then the stock will be assessed for possible repurchase, if the value is expected to increase

5. Reason for purchase no longer exists

6. Stock becomes intrinsically overvalued above the analysts current consider to sell price and or is substantially overvalued based on (P/E, P/B, P/S, etc.) relative to its peers

7. New company news such as mergers/acquisitions, new prod-ucts being introduced or eliminated that would warrant a reevaluation

Risk ControlsTo control portfolio risk, the following rules apply:

x No more than 10% of the portfolio may be invested in one particular stock

x Options should be used for hedging purposes only

x No more than 25% of the portfolio may be invested in one sector

x When a sector reaches 50% above or below the benchmarks, we will use this as a warning signal that a sector may be over or under weighted, which may cause unwanted risk

x We use a margin of safety of 25%, 15%, 15% in small, mid and large cap stocks, respectively, pertaining to intrinsic value


Investment Philosophy and ProcessInvestment CriteriaAs a team, we consider investing in undervalued stocks of good companies that have sound business and financial fundamentals. When choosing fixed-income securities, the IMP managers look at the macro environment, including the interest rate cycle, credit risk, and inflation expectations to determine what type of fixed income vehicles should be considered and what the duration of those investments should be. Our investment considerations in-clude the following:

x Qualitative analysis suggests that the company has a sound business strategy.

x We conduct a SWOT analysis to explain a company’s internal strengths and weakness and their external opportunities and threats

x Company Fundamentals

- We examine a firm’s key financial ratios over the past several years, and compare them to the industry and competitors to determine if a company has sound finan-cial fundamentals. The financial performance analysis is based on, but not limited to, the following financial ratios:

x Solvency and Financial leverage ratios

- Current Ratio > 1

- Debt Ratio < Industry Average

x Efficiency Ratios

- Total Asset Turnover > Industry Average

- Inventory Turnover > Industry Average

x Profitability Ratios

- Net Profit Margin > Industry Avg.

- Return on Assets > Industry Avg.

- Return on Equity > Industry Avg.

x Growth Ratio (5 year)

- Historical EPS Growth > Industry Avg.

- Historical Revenue Growth > Ind. Avg.

- Projected EPS Growth > Industry Avg.

x Ratios compared to the industry average are also analyzed for positive trends from quarter to quarter

x The company must meet at least 6 out of the 10 criteria with at least one from each category


Sector AllocationsAs of December 2012, the IMP portfolio is comprised of investments in all of the 10 S&P/ MSCI GICS sectors. To achieve better perfor-mance than our benchmark, we over-weight and under-weight sectors in comparison to the S&P 500 index. This decision was based on our economic outlook and performance expectations for each sector. The table shows the IMP’s sector weights as compared to those of the S&P 500. The sector weights have been continuously re-evaluated in spring 2013 in an effort to outperform the benchmark. Mean-while, to construct a diversified portfolio, we set a minimum standard of investing in at least seven sectors. This allows us to better control risk, while providing the leeway needed to outperform the benchmark.

SECTOR IMP S&P 500 SECTOR WEIGHT GOALS

Industrials 15.10% 10.10% Move to Market Weight

Healthcare 13.25% 12.00% Stay Market Weight

Consumer Discretionary 8.69% 11.50% Stay Under Weight

Information Technology 11.65% 19.00% Move Under Market Weight

Telecommuncation Services 5.64% 3.10% Stay Over Weight

Consumer Staples 8.35% 10.60% Stay Under Market Weight

Basic Materials 2.97% 3.60% Stay Under Weight

Utilities 2.49% 3.40% Stay Under Weight

Energy 6.93% 11.00% Stay Under Market Weight

Financial Services 7.63% 15.60% Stay Under Market Weight

15.10%

13.25%

8.69%

11.65%

5.64%

8.35%

2.97% 2.49%

6.93% 7.63%

0.00%

2.00%

4.00%

6.00%

8.00%

10.00%

12.00%

14.00%

16.00%

18.00%

20.00%

Industrials

Healthcare

Consumer Discre@onary

Inform

a@on Technology

Telecommunca@on Services

Consumer Staples

Basic Materials

U@li@es

Energy

Financial Services

IMP Sector Weights vs. S&P 500 Weights 12/31/12

IMP Weight

S&P 500

IMP SECTOR WEIGHTS VS. S&P 500 WEIGHTS 12/31/12

PORTFOLIO CHARACTERISTICS IMP S&P 500 ASSET ALLOCATION

Price/ Earnings (P/E) 17.50 13.70 Large Cap 60.62%

Price/ Book (P/B) 2.60 2.00 Mid Cap 0.00%

Dividend Yield (%) 2.46 2.30 Small Cap 4.09%

ROE (%) 18.18 19.70 Fixed Income 7.12%

Beta 0.75 1.00 Money Market 18.30%

Debt / Equity 0.54 0.74 Alternatives 9.90%


Fund PerformanceTop 5 Performing Stocks in 2012The IMP’s return was 13.76% for 2012. The following table displays the top five highest returns for 2012. Valero Energy Corporation leads the way with the highest return in 2012, yielding 62.09%. Discover Financial Services takes second with a return of 60.63% during 2012. Snap-on Inc., Lowes Co., and Vulcan Materials Co. all yielding strong returns; 56.05%, 39.95%, and 32.27%, respectively.

TOP 5 PERFORMING STOCKS IN 2012

STOCK TICKER RETURN

Valero Energy Corporation VLO 62.09%

Discover Financial Services DFS 60.63%

Snap-on Co. SNA 56.05%

Lowes Co. LOW 39.95%

Vulcan Materials Co. VMC 32.27%

Top 10 Holdings as of December 31, 2012 The ten largest holdings represent 40.95% of the total portfolio. The top ten holdings consist of iShares Gold Trust, Novartis AG ADR, Snap-on Inc, Valero Corp., Yum Brands Inc., Lowes Co., SPDR Int’l Infl-Protected Bond ETF, Danaher Corp., Verizon Wireless Comm., and UnitedHealth Group Inc. iShares Gold Trust, No-vartis AG ADR, and Snap-on Inc. held the highest weights at the end of 2012, with weights at 4.81%, 4.59%, 4.41%, respectively.

TOP 10 HOLDINGS AS OF DECEMBER 31, 2012

STOCK TICKERHOLDING RETURN

INVESTMENT WEIGHT

iShares Gold Trust IAU -4.17% 4.81%

Novartis AG ADR NVS 19.25% 4.59%

Snap-on Inc. SNA 119.97% 4.41%

Valero Energy Corporation VLO 50.98% 4.23%

Yum Brands Inc. YUM 126.97% 4.00%

Lowes Co. LOW 50.29% 3.96%

SPDR Int’l Infl-Protected Bond ETF WIP 8.60% 3.90%

Danaher Corp. DHR 119.99% 3.74%

Verizon Wireless Comm. VZ 54.31% 3.67%

UnitedHealth Group Inc. UNH -7.56% 3.63%

Bottom 5 Performing Stocks in 2012 The IMP had some underperforming stocks as well. As shown in the table below, the following companies that underperformed in 2012 were Excelon Corp., Intel Corp., Annaly Capital Manage-ment and Coach, Inc., and Excelon Corp. was recently sold in 2013. Procter & Gamble Co. yielded a positive return for 2012, but underperformed the sector as a whole.

BOTTOM 5 PERFORMING STOCKS IN 2012

STOCK TICKER RETURN

Excelon Corporation EXC -31.43%

Intel Corporation INTC -14.97%

Annaly Capital Management NLY -12.03%

Coach Inc. COH -9.06%

Procter & Gamble Co. PG 1.77%

MONTHLY RETURNS FOR 2012


Risk-adjusted PerformanceIMP measures its performance on a risk-adjusted basis. The risk of our investments is based on the standard deviations of monthly returns over the past year. The higher the fluctuations, the riskier the investments. IMP’s standard deviation of monthly returns was higher than the S&P 500, as well as its benchmark, meaning IMP took more risk on its investments. Our risk-adjusted return is re-flected by the Sharpe Ratio. The Sharpe ratio measures the funds return generated relative to its standard deviation. In 2012, IMP underperformed the S&P 500 on a risk-adjusted basis. However, our higher return than the blended benchmark compensated for the risk. Our Sharpe ratio of 4.45 was higher than the blended benchmark Sharpe ratio of 3.97.

$10,000

$10,200

$10,400

$10,600

$10,800

$11,000

$11,200

$11,400

$11,600

$11,800

2011 Jan Feb Mar Apr May Jun July Aug Sept Oct Nov Dec

2012 Annual Performance-Growth of $10,000

IMP

S&P500

Blend

2012 ANNUAL PERFORMANCE-GROWTH OF $10,000

Fund Performance2012 IMP RELATIVE & RISK ADJUSTED PERFORMANCE

Return Standard Deviation

Sharpe Ratio

IMP 13.76% 3.09% 4.45

S&P 500 16.00% 3.04% 5.26

Blend 9.46% 2.38% 3.97


PORTFOLIO HOLDINGS 2012

HOLD Apple Inc. (NASDAQ: AAPL) Analyst: Lance Shifflett Sector: Technology Stock Type: Large Growth MKT CAP: $424.2B Holding Return: 210.14% Industry: Computer Systems Morning Star Rating: ****

Key Stock Statistics

2008 2009 2010 2011 2012 Ind. (2012)

Total Return % (56.91) 146.90 53.07 25.56 32.71 15.37

Return on Assets %

14.89 18.92 22.84 27.07 28.54 6.42

Return on Equity %

27.19 31.27 35.28 41.67 42.48 12.33

Net Margin % 14.88 19.19 21.48 23.95 26.67 4.81

Asset Turnover 1.00 0.99 1.06 1.13 1.07 1.48

Financial Leverage

1.88 1.50 1.57 1.52 1.49 1.92

Operating Margin %

19.3 27.4 28.2 31.2 35.3 6.53

Revenue Growth % (yoy)

56.17 14.44 52.02 65.96 44.58 12.90

Operating Income Growth %(yoy)

42.32 87.09 56.60 83.79 63.48 (5.43)

EPS Growth % 36.39 69.40 66.85 82.17 59.50 (10.62)

Current Ratio 2.46 2.74 2.01 1.61 1.50 1.45

Valuation Analysis

2008 2009 2010 2011 2012

P/E 15.8 20.5 18.0 11.5 10.48

P/B 3.3 5.3 5.4 4.2 3.41

P/S 2.3 4.1 3.9 3.0 2.63

P/FCF 7.2 16.0 13.2 8.4 9.90

Dividend Yield %

-- -- -- -- 1.00

Current Price Fair Value 52 Wk Range $532.17 $600.00 $705.07-409.00 Business Summary: Apple designs and manufactures personal computers, mobile communication devices, and portable music and video players. Their product line includes phones (iPhone), tablets (iPad), PCs (Mac), and digital music players (iPod). Apple sells their products online, as well as through company-owned stores and third-party retailers. In early September, Apple introduced the iPhone 5, which was released on September 21. Investment Rationale/Risk

Apple’s iOS ecosystem creates customer lock-in.

Well positioned to tap into emerging markets like smart watches and mobile payments.

Apple is a financially strong company having vast amounts of revenues, profits, margins, cash flows, and cash on hand to be used for dividends and buying back shares.

Overdependence on the iPhone and iPad; creating 75.8% of revenue between them.

Earnings Growth Estimates Company Industry

Current year % 1.40 (3.00)

Next year % 14.30 11.90

Past 5 years % 57.00 31.40

Next 5 years % 15.10 8.50

Peers Return (2012) %

ROE %

International Business Machines Corp (IBM)

5.97 85.15

Hewlett-Packard Co.(HPQ) (42.68) (41.43)

Dell Inc.(DELL) (29.60) 41.86



HOLD Abbott (NYSE: ABT) Analyst: Michael Pavusik Sector: Healthcare Stock Type: Large Value MKT CAP: $105.0B Holding Return: 18.04% Medical appliance & Equipment Morning Star Rating: ****


2008 2009 2010 2011 2012 Ind. (2012)

Total Return % (2.45) 4.08 -8.08 21.29 16.21 12.7

Return on Assets %

11.88 12.12 8.27 7.90 9.35 7.25

Return on Equity %

27.69 28.49 20.45 20.20 23.31 13.3

Net Margin % 16.53 18.68 13.16 12.17 14.95 12.9

Asset Turnover .72 .65 .63 .65 .63 --

Financial Leverage

2.43 2.29 2.66 2.47 2.52 2.52

Operating Margin %

19.3 20.3 17.3 14.8 20.3 18.2


13.94 4.19 14.31 10.48 9.0 4.0

Operating Income Growth % (yoy)

24.3 9.52 (2.38) (5.51) -- 15.98

EPS Growth % 35.06 18.27 (19.78) 1.69 23.59 --

Current Ratio 1.47 1.79 1.29 1.54 2.36 1.64

Valuation Analysis

2008 2009 2010 2011 2012

P/E 17.6 14.6 16.2 18.7 17.6

P/B 4.7 3.7 3.3 3.6 3.9

P/S 2.8 2.7 2.1 2.3 2.6

P/FCF 11.3 11.5 8.5 9.8 11.2

Dividend Yield %

2.63 2.89 3.59 3.34 3.07

Current Price Fair Value 52 Wk Range $32.05 $40.00 $25.97-$34.52 Business Summary: Abbott Laboratories engages in the discovery, development, manufacture, and sale of health care products worldwide. The company primarily serves retailers, wholesalers, hospitals, health care facilities, laboratories, physicians, offices, and government agencies. Abbott Laboratories was founded in 1888 and is headquartered in Abbott Park, Illinois. They employ 90,000 employees in 130 countries. Pharmaceutical sales are the company’s largest business. In the beginning of 2013, Abbott spins off its Pharmaceutical business into a separate company called AbbVie. Investment Rationale/Risk

AbbVie has taken most of the companies’ sale revenue, but this was done to help restructure Abbott into a stronger company.

Abbott is a very well diversified company with Strong products that are used worldwide. Abbott is a world leader in Immunoassays, blood screening, and stents.

Abbott Is an aggressive growth stock with strong financials supporting it. This company has high operating and profitability margin. The stock split with AbbVie has diversified the risks associated with the patent loss of Humira.


Current year % 23.59 13.5

Next year % 12.6 10.6

Past 5 years % 10 9.3

Next 5 years % 27.2 6.8


ROE %

Johnson & Johnson (JNJ) 7.53 17.81

Pfizer (PFE) 18.35 17.84

Merck (MRK) 7.59 11.47



HOLD Air Products and Chemicals, Inc. (NYSE: APD) Analyst: Xin Xin Cheng Sector: Basic Material Stock Type: Large Blend MKT CAP: $18.2B Holding Return: -6.17% Chemicals Morning Star Rating: ***


2008 2009 2010 2011 2012 Ind. (2012)

Total Return % (47.25) 64.83 14.6 (3.78) 1.63 10.79

Return on Assets %

7.21 4.93 7.76 8.81 7.47 4.30

Return on Equity %

17.28 12.85 19.9 21.59 19.02 15.60

Net Margin % 8.73 7.65 11.4 12.14 12.14 5.20

Asset Turnover 0.83 0.65 0.68 0.73 0.62 0.80

Financial Leverage

2.5 2.72 2.43 2.47 2.62 3.30

Operating Margin %

14.36 10.25 15.4 16.09 13.34 13.20


3.75 (20.72) 9.32 11.7 (4.66) 3.94

Operating Income % (yoy)

6.26 (43.42) 64.13 (16.79) (20.96) --

EPS Growth % (10.56) (28.67) 60.14 18.78 (3.37) --

Current Ratio 1.29 1.20 1.35 1.36 1.27 1.54

Valuation Analysis

2008 2009 2010 2011 2012

P/E 11.8 21.7 18.9 15.3 17.2

P/B 2.2 3.4 3.4 3.0 2.8

P/S 1.1 2.1 2.1 1.8 1.8

P/FCF 19.3 120.7 38.5 45.2 70.9

Dividend Yield %

3.5 2.22 2.16 2.72 3.05

Current Price Fair Value 52 Wk Range $84.02 $92.00 $76.11-92.76 Business Summary: Air Products and Chemicals, Inc. was founded in 1940 and is headquartered in Allentown, Pennsylvania. As one of the largest global producers of industrial gases, the company provides atmospheric gases, process and specialty gases, performance materials, equipment, and services worldwide. It also has a large specialty chemicals business. The company operates in four segments: Merchant Gases, Tonnange Gases, Electronics and Performance Material, and Equipment and Energy. The company operates in more than 40 countries, with international sales representing 60% of revenue. Air Products generates $9 billion in annual sales and employs 21,000 workers. Investment Rationale/Risk

The company’s ROA, ROE, net margins, and revenue growth are all well above the industry averages.

The dividend payments have been increasing each year from 2008 to 2012.

Unique portfolio of products and services, well-diversified end markets, and global operation will continue to support Air Products’ performance in an improving industrial economy.



Next year % 10.70 12.40

Past 5 years % 5.46 --

Next 5 years % 8.88 11.61


ROE %

Basf SE ADR (BASFY) (0.83) 19.54

E.I. du Pond de Nem. (DD) 7.45 30.10

Dow Chemical Co (DOW) (1.88) 4.80



BUY Vanguard Short-Term Bond ETF (NYSEArca: BSV) Analyst: Robert Watson Sector: Fixed Income Interest Rate Sensitivity: Limited Credit Quality: High Assets Under Management: $11.5B Expenses: 0.11% Holding Return: -0.39% Morning Star Rating: ***

Portfolio Statistics

Average Effective Duration 2.69 years

Average Credit Quality AA

12-Month Yield% 1.54%

SEC Yield (YTM)% 0.53%

Portfolio Composition

U.S. Treasury 61.51%

Corporate Bonds 21.41%

U.S. Agency 8.02%

Securitized 0.20%

Cash 1.89%

Reward and Risk

1-Year Return 2.00%

3-Year Annualized Return 2.62%

3-Year Sharpe Ratio 1.96

Current Price NAV 52 Week Range $80.99 $80.98 $80.72-81.51 ETF Summary: The Vanguard Short-Term bond fund allows for broad fixed income exposure to government, government agency, and corporate bonds. The fixed income securities in this fund have high credit quality and short terms to maturity of 1-5 years. The expense ratio is very low, .11%. Investment Rationale/Risk

High credit quality Low interest rate risk Low fees Yields on this investment will be held low as long as the

Federal Reserve continues to target low interest rates.



HOLD China Mobile Ltd. ADR (NYSE: CHL) Analyst: Evan Miller Sector: Telecommunication Services Stock Type: Large Value MKT CAP: $212.0B Holding Return: 3.41% Communication Services Morning Star Rating: ***


2008 2009 2010 2011 2012 Ind. (2012)

Total Return % (39.61) (5.55) 10.45 1.42 (6.68) (1.01)

Return on Assets %

18.47 16.35 14.83 13.87 12.91 13.10

Return on Equity %

27.64 24.27 22.10 20.55 18.84 18.83

Net Margin % 27.35 25.47 24.66 23.84 23.09 17.21

Asset Turnover 0.68 0.64 0.60 0.58 .56 0.67

Financial Leverage

1.49 1.48 1.50 1.47 1.50 3.45

Operating Margin %

34.59 32.52 31.07 28.66 27.29 23.20


15.52 9.64 7.33 8.81 18.08 12.91


14.96 3.08 2.55 0.36 26.86 50.19

EPS Growth % 29.42 2.35 3.88 5.26 8.33 8.38

Current Ratio 1.33 1.37 1.26 1.40 1.50 1.32

Valuation Analysis

2008 2009 2010 2011 2012

P/E 12.5 11.2 11.1 10.1 10.5

P/B 3.2 2.5 2.3 2.0 1.9

P/S 3.4 2.8 2.7 2.5 2.4

P/FCF 7.3 6.2 5.7 5.4 5.8

Dividend Yield %

3.18 3.44 3.35 3.79 3.71

Current Price Fair Value 52 Wk Range $58.25 $60.00 $49.57-$59.73 Business Summary: China Mobile Ltd. provides a range of mobile telecommunications services in all 31 provinces, autonomous regions and directly-administered municipalities in Mainland China as well as in Hong Kong. Investment Rationale/Risk

Largest mobile carrier in the world with over 600 million subscribers.

With superior network coverage and a strong brand, the carrier boasts of high customer loyalty, especially among high-end business users.

Government control remains the biggest risk for China Mobile.

China Mobile is controlled by state-owned CMCC, which owns 74% of the firm.


Current year % -- --

Next year % (3.70) 10.90

Past 5 years % 17.10 (1.50)

Next 5 years % -- 11.40


ROE %

China Telecom Corp (CHA) (8.51) 5.76

China Unicom, Ltd (CHU) (10.56) 2.64

Vodafone Group, PLC (VOD) (0.20) (2.22)



SELL Coach Inc. (NYSE: COH) SOLD February 8, 2013 Analyst: Robert Watson Sector: Consumer Discretionary Stock Type: Large Growth MKT CAP: $14.3B Holding Return: -12.44% Luxury Goods Morning Star Rating: ****


2008 2009 2010 2011 2012 Ind. (2012)

Total Return % (32.08) 76.96 52.85 11.85 (7.22) 16.04

Return on Assets %

33.16 25.77 29.21 34.53 36.20 19.29

Return on Equity %

45.71 38.82 45.91 56.50 57.63 29.65

Net Margin % 24.62 19.30 20.37 21.18 21.81 18.27

Asset Turnover 1.35 1.34 1.43 1.63 1.66 .99

Financial Leverage

1.50 1.51 1.64 1.63 1.56 1.58

Operating Margin %

36.06 30.09 31.88 31.38 31.74 26.92


21.75 1.56 11.68 15.27 16.80 20.20


15.48 (15.27) 18.34 13.45 16.5 15.85

EPS Growth % 23.30 (11.98) 21.99 25.32 20.89 26.09

Current Ratio 3.07 3.04 2.46 2.45 2.51 2.20

Valuation Analysis

2008 2009 2010 2011 2012

P/E 9.5 18.3 20.1 19.1 15.3

P/B 4.6 6.2 9.4 9.5 7.5

P/S 2.2 3.5 4.3 4.1 3.3

P/FCF 9.5 10.9 17.5 14.3 13.2

Dividend Yield %

-- .62 .95 1.35 2.03

Current Price Fair Value 52 Wk Range $55.57 $37.80 $49.33-79.03 Business Summary: Coach markets and distributes a wide array of personal accessories including handbags, jewelry, and fragrances. The company is headquartered in New York City. Its products are manufactured by independent manufacturers and sold in department stores, company operated stores, specialty stores and online retailers in North America, Japan, China, and other Asian countries. Investment Rationale/Risk

Coach has recently been making a substantial effort to grow its business in international markets, returns on these investments have been hampered by a global economic slowdown especially in China.

Coach is not just expanding geographically, but it is also trying to broaden its product line into shoes and men's accessories.

Coach's mid-priced goods expose it to middle class consumers and the cyclicality of their spending habits.



Next year % 11.9 16.70

Past 5 years % 16.26 11.41

Next 5 years % 13.50 14.13

Peers Return

(2012) % ROE %

Moet Hennessy Louis Vuitton SA (LVMUY)

31.54 14.69

Hermès International (HESAY) 2.86 26.48

Compagnie Financier Richemont SA (CFRUY)

54.30 19.81



HOLD Cisco System, Inc. (NASDAQ: CSCO) Analyst: Peter Rosenberger Sector: Technology Stock Type: Large Blend MKT CAP: $111.2B Holding Return: 20.80% Communication Equipment Morning Star Rating: ****


2008 2009 2010 2011 2012 Ind. (2012)

Total Return % (39.79) 46.87 (15.50) (9.74) 11.45 7.92

Return on Assets %

14.37 9.67 10.41 7.72 8.99 3.15

Return on Equity %

24.46 16.81 18.74 14.19 16.32 6.67

Net Margin % 21.00 20.36 16.98 19.40 17.46 4.65

Asset Turnover .71 .57 .54 .51 .52 .78

Financial Leverage

1.71 1.76 1.83 1.84 1.79 2.12

Operating Margin %

23.88 20.27 22.89 17.76 21.85 6.39


13.22 (8.66) 10.86 7.94 5.37 (0.52)


9.52 (22.45) 25.16 (16.26) 31.16 --

EPS Growth % 11.97 (19.85) 26.67 (12.03) 27.35 6.26

Current Ratio 2.58 3.24 2.67 3.27 3.49 2.16

Valuation Analysis

2008 2009 2010 2011 2012

P/E 12.3 24.4 14.8 15.7 11.95

P/B 2.7 3.4 2.5 2.1 1.99

P/S 2.5 4.0 2.8 2.3 2.34

P/FCF 8.4 16.1 11.3 9.3 13.17

Dividend Yield %

-- -- -- 1.00 2.24

Current Price Fair Value 52 Wk Range $19.65 $24.00 $16.07-$21.15 Business Summary: Cisco Systems is the world’s leading supplier of data networking equipment and software. Its products include routers, switches, access equipment, and network-management software that allow data communication among dispersed computer networks. The firm also entered into new and emerging markets such as service provider video, data center technology, and wireless markets. This is being achieved through active acquisition and refocused business line strategy. Investment Rationale/Risk

Cisco’s recent acquisition have provided a more diverse product portfolio allowing Cisco to become an entire IT provider in existing and emerging markets which their acquisition already have a strong customer base.

Cisco has been undergoing a restricting process to establish a stronger business line to counter act the deteriorating sales in the routers and switches market. The long-term commitment of management and strong financial stability have provided a stable foundation for long term profit and stability.

Cisco has had a decline in overall revenue growth over the past couple of years due to the diminishing profitability of the router and switches business lines. But the company still has been able to outperform its competition largely due to its economies of scale advantage.



Next year % 6.10 15.30

Past 5 years % 5.70 7.90

Next 5 years % 9.90 15.20

Peers Return

(2012) % ROE %

Qualcomm, Inc. (QCOM) 15.25 20.20

Hewlett-Packard (HPQ) (42.68) (41.43)

Juniper Networks, Inc. (JNPR) (3.63) 2.65



HOLD Discover Financial Services (NYSE: DFS) Analyst: Nnaemeka Okoro Sector: Financial Services Stock Type: Large Value CAP: $22.4B Holding Return: 52.92% Discover Financial Services Morning Star Rating: ***


2008 2009 2010 2011 2012 Ind. (2012)

Total Return % (35.21) 55.19 26.51 31.03 62.46 36.43

Return on Assets %

2.40 2.85 1.25 3.40 3.22 3.33

Return on Equity %

16.11 18.54 9.73 29.96 26.55 16.7

Net Margin % 19.31 18.16 10.03 31.16 74.08 21.2

Asset Turnover 0.12 0.16 0.12 0.11 0.04 0.19

Financial Leverage

6.74 6.32 9.41 8.35 8.17 5.76

Operating Margin %

34.49 31.49 19.06 49.69 (24.64) 21.47


19.65 18.79 (1.13) 6.12 -- 18.58

Operating Inc. Growth % (yoy)

75.37 27.95 (40.17) 176.72 -- 25.90

EPS Growth % 56.10 24.48 (48.95) 232.79 9.85 (30.53)

Current Ratio -- -- -- -- -- 0.75

Valuation Analysis

2008 2009 2010 2011 2012

P/E 4.3 6.2 15.2 5.9 8.6

P/B 0.8 1.1 1.6 1.5 2.1

P/S 1.0 1.1 1.5 1.8 6.4

P/FCF 1.0 2.1 2.6 3.6 6.6

Dividend Yield %

2.52 0.54 0.43 1.17 1.0

Current Price Fair Value 52 Wk Range $38.59 $39.00 $24.21-$41.61 Business Summary: Discover Financial Services operates one of the two closed-loop credit card networks in the United States; American Express operates the other. Discover issues proprietary cards, extends card loans to cardholders, and acquires transactions from merchants whenever a cardholder pays with a Discover card. Investment Rationale/Risk

Significant returns of at least 25% over the last past 3 years.

Increasing dividend yield. Better-tailored student loans than its competitors. Discover cards are now accepted at more cash registers

worldwide. Positive estimates within the next 5 years.



Next year % (0.80) 17.00

Past 5 years % 18.20 17.40

Next 5 years % 9.00 13.40

Peers Return

(2012) % ROE %

Visa, Inc. (V) 47.18 7.93

American Express Co. (AXP) 18.78 23.79

Capital One Financial Corp. (COF) 32.41 9.94



HOLD Danaher Corporation (NYSE: DHR) Analyst: Caitlin Guindon Sector: Industrials Stock Type: Large Growth MKT CAP: $42.1B Holding Return: 63.92% Diversified Industrials Morning Star Rating: ****


2008 2009 2010 2011 2012 Ind. (2012)

Total Return % (35.34) 33.07 25.66 (0.08) 19.05 20.17

Return on Assets %

7.54 6.21 8.54 8.33 7.61 3.26

Return on Equity %

13.94 10.74 14.15 14.19 13.32 7.97

Net Margin % 10.38 10.30 13.58 13.50 13.10 6.77

Asset Turnover 0.73 0.60 0.63 0.62 0.58 0.68

Financial Leverage

1.78 1.68 1.62 1.77 1.73 3.41

Operating Margin %

14.7 13.8 16.4 16.3 17.3 9.14


15.16 (11.91) 18.04 21.87 -- 3.14


7.04 (17.49) 40.45 20.81 --

24.96

EPS Growth % (5.73) (12.41) 52.60 17.80 -- 1.25

Current Ratio 1.53 1.89 1.73 1.50 1.8 4.16

Valuation Analysis

2008 2009 2010 2011 2012

P/E 14.3 21.7 17.9 17.0 17.3

P/B 1.8 2.1 2.3 1.9 2.0

P/S 1.5 2.3 2.4 2.0 2.2

P/FCF 10.2 14.0 15.5 12.5 11.7

Dividend Yield %

0.21 0.17 0.17 0.19 0.18

Current Price Fair Value 52 Wk Range $55.90 $72.71 $60.72-62.01 Business Summary: Danaher has generated double-digit margins and growth through acquisitions and its proprietary business integration system. Its focus on increasing efficiencies and attacking niche markets has helped the firm build a narrow economic moat. Investment Rationale/Risk

Acquired more than 400 companies since 1984. Positive: No one company has accounted for 10% or more

of their revenue for over 3 consecutive years. CFA and CAO sold most of their shares for 4 and 5.5$

billion in January, but four big shareholders still include T. Rowe Price Associates, FMR LLC, Chairman of Executive Committee and Company Chairman.

Most profitable among peers. Increased cash flow over past 10 years.



Next year % 11.60 20.70

Past 5 years % 13.13 --

Next 5 years % 12.73 13.96


ROE %

General Electric (GE) 21.11 11.39

Bharat Heavy Electricals Ltd. (BHEL)

(1.76) --

Smiths Group PLC (SMGZY) 37.61 21.74



BUY Express Scripts (NASDAQ: ESRX) Analyst: Michael Pavusik Sector: Healthcare Stock Type: Large Growth MKT CAP: $47B Holding Return: 3.3% Health Care Plans Morning Star Rating: ****


2008 2009 2010 2011 2012 Ind. (2012)

Total Return % (24.6) 57.18 25.09 (17.3) 20.83 3.81

Return on Assets %

4.08 2.84 4.00 3.53 2.55 7.43

Return on Equity %

87.47 35.75 33.00 41.87 10.15 16.5

Net Margin % 3.53 3.34 2.63 2.77 1.40 4.3

Asset Turnover 4.08 2.84 4.00 3.53 2.55 1.67

Financial Leverage

5.11 3.36 2.93 6.31 2.49 2.38

Operating Margin %

5.8 6.1 4.6 5.0 3.0 7.0


20.27 12.61 81.72 2.57 56.0 6.2


20.69 17.02 38.21 11.63 -- 61.04

EPS Growth % 43.26 .97 39.55 16.59 4.1 1.99

Current Ratio .75 .76 .75 1.48 .82 --

Valuation Analysis

2008 2009 2010 2011 2012

P/E 17.7 27.8 24.4 17.7 30.2

P/B 12.6 6.7 7.9 8.8 1.9

P/S 0.6 0.9 0.7 0.5 0.4

P/FCF 12.5 13 13.9 10.5 8.4

Dividend Yield %

-- -- -- -- --

Current Price Fair Value 52 Wk Range $54.22 $73.00 $43.85-$65.45 Business Summary: Express Scripts is the largest pharmacy benefit manager in the United States. Express Scripts offers healthcare management & administration services such as managed care organizations, health insurers, workers’ compensation plans & government health programs. Its reportable segments are: PBM & Other Business Operations. ESRX has been active in mergers and acquisitions over past two decades. In April 2012, ESRX merged with Medco making ESRX a large competitor in health plans and drug supply chain middlemen. Investment Rationale/Risk

Revenue increased by 133% Claims volume increased by 116% Customer retention rate of 94% ESRX receives a very high profit margin off generic brand

orders. This expiration is supposed to happen within the coming year. With the aging population of the US, this can introduce huge revenue increases.



Next year % 15.2 12.0

Past 5 years % 25.15 --

Next 5 years % 17.67 14.38


ROE %

UnitedHealth Group (UNH) 8.6 18.58

WellPoint (WLP) (6.23) 11.28

Cigna (CI) 27.38 17.92



SELL Exelon Corp (NYSE: EXC) SOLD December 3, 2012 Analyst: Isabel Scott Sector: Utilities Stock Type: Large Value MKT CAP: $28.9B Holding Return: -29.51% Utilities - Diversified Morning Star Rating: BBB+


2008 2009 2010 2011 2012 Ind. (2012)

Total Return % (29.40) (8.34) (10.50) 9.20 (26.59) 5.97

Return on Assets %

5.84 5.58 5.05 4.65 1.74 1.74

Return on Equity %

25.84 22.86 19.56 17.86 6.48 6.48

Net Margin % 14.51 15.63 13.75 13.18 4.94 4.94

Asset Turnover 0.40 0.36 0.37 0.35 0.35 0.35

Financial Leverage

4.33 3.89 3.85 3.83 3.67 3.67

Operating Margin %

28.10 27.43 25.35 23.67 -- --


(0.30) (8.17) 7.66 1.50 -- --

Operating Income % Growth % (yoy)

23.92 (10.36) (0.51) (5.21) -- --

EPS Growth % 1.98 (0.97) (5.38) (3.10) (62.13) (51.43)

Current Ratio 1.32 1.28 1.51 1.10 1.30 1.30

Valuation Analysis

2008 2009 2010 2011 2012

P/E 13.6 11.9 10.8 11.6 21.0

P/B 3.3 2.6 2.0 2.0 1.2

P/S 2.0 1.9 1.5 1.5 1.0

P/FCF 5.6 5.3 5.3 5.9 4.0

Dividend Yield %

3.64 4.30 5.04 4.84 5.8

Current Price Fair Value 52 Wk Range $33.75 $42.00 $28.40-39.82 Business Summary: Exelon, headquartered in Chicago, Illinois, is an energy provider. It has the largest nuclear plant operation in the United States. With operations and business activities in 47 states, this company has a strong foothold in delivering electricity and gas to private and public customers. They have the ability to generate electricity with low greenhouse emissions at a lower cost than competing fossil-fuel power producers. Investment Rationale/Risk

Exelon is a significant market leader in nuclear power generation

They have a strong consumer base in retail Although Exelon has the opportunity to greatly expand due

to the popularity of renewable energy and an increase in demand for electricity, their dependence on subsidiaries to meet financial obligations could slow them down.

Government regulations and restrictions could also pose a threat or risk to this company.

Sold because of poor performance and did not meet the investment criteria of the portfolio.


Current year % (12.60) 15.00

Next year % (8.00) 2.90

Past 5 years % (7.01) --

Next 5 years % (6.65) 6.62

Peers Return

(2012) % ROE %

GDF Suez (GDFZY) (22.56) 5.30

Electricite de France S.A. (ECIFF) (24.48) 9.04

E. On SE (EONGY) (12.18) (5.73)



SELL Ford Motor Company (NYSE: F) Sold 2/21/13 Analyst: Robert Watson Sector: Consumer Discretionary Stock Type: Large Core MKT CAP: $52.75B Holding Return: -22.52% Automotive Manufacturers Morning Star Rating: ****


2008 2009 2010 2011 2012 Ind. (2012)

Total Return % (65.97) 336.68 67.90 (35.91) 22.21 35.29

Return on Assets %

(5.9) 1.32 3.65 11.78 3.07 5.94

Return on Equity %

-- -- -- 281.62 36.58 13.15

Net Margin % (10.03) 2.3 5.09 14.83 4.22 9.0

Asset Turnover .59 .57 .72 .79 .73 .71

Financial Leverage

-- -- -- 11.87 11.95 5.78

Operating Margin %

(2.82) (2.39) 5.16 5.10 4.69 11.62


(15.18) (19.12) 9.00 5.67 (1.40) 12.38


(151.4) -- -- 4.28 (9.39) (64.85)

EPS Growth % -- -- 93.02 197.59 (71.26) (49.6)

Current Ratio 1.33 2.96 2.67 2.64 2.11 1.42

Valuation Analysis

2008 2009 2010 2011 2012

P/E (.4) 11.6 10.1 2.2 9.1

P/B (.3) (4.3) (94.3) 2.7 3.2

P/S 0.0 0.3 0.5 0.3 0.4

P/FCF (29.1) 1.9 6.1 4.6 5.7

Dividend Yield %

-- -- -- -- 1.54

Current Price Fair Value 52 Wk Range $12.76 $11.43 $8.92-$12.96 Business Summary: Ford Motor Company develops, manufactures, distributes and markets automobiles in four geographical segments around the world. Its largest segment is North America where it derives 60% of all revenue. The company also has a Financial Services segment where it obtains about 5% of revenues, but about 20% of its bottom line. Ford is gaining momentum with its fuel-efficient vehicles including those equipped with the new C-Max engine. Investment Rationale/Risk

Short-term future profits will be subject to substantial restructuring efforts in Europe (est. $800 million in employee separation costs).

North American sales, especially in the U.S., are expected to be high in the next year or two due to pent up demand. However, Ford's ability to capitalize on this opportunity is dependent on its ability to use its fuel-efficient vehicles to compete with imports.

Ford recently doubled its dividend, but it does not have a very good history of paying consistent dividends.

Stock is much more volatile than other options and does not have enough upside to justify the risk.


Current year % (1.40) (1.60)

Next year % 20.10 40.70

Past 5 years % 3.76 (47.5)

Next 5 years % 10.53 15.01


ROE %

General Motors(GM) 42.23 16.23

Toyota Motors (TM) 43.09 2.72

Honda Motors (HMC) 22.32 4.78



HOLD FedEx Corporation (NYSE: FDX) Analyst: Joshua Rakvin Sector: Industrials Stock Type: Large Blend MKT CAP: $31.1B Holding Return: 9.83% Integrated Shipping & Logistics Morning Star Rating: ****


2008 2009 2010 2011 2012 Ind. (2012)

Total Return % (27.58) 30.77 12.02 (9.67) 10.49 4.77

Return on Assets %

4.53 0.39 4.82 5.55 7.09 1.98

Return on Equity %

8.28 0.70 8.63 10.00 13.57 4.98

Net Margin % 2.96 0.28 3.41 3.69 4.76 2.51

Asset Turnover 1.53 1.42 1.41 1.50 1.49 1.00

Financial Leverage

1.76 1.78 1.80 1.80 2.03 --

Operating Margin %

5.47 2.1 5.75 6.05 7.08 2.49


7.78 (6.47) (2.15) 13.16 8.59 5.25


(36.66) (64.0) 167.47 19.02 33.98 --

EPS Growth % (44.44) (91.39) -- 21.54 40.26 4.54

Current Ratio 1.35 1.57 1.57 1.70 1.69 1.09

Valuation Analysis

2008 2009 2010 2011 2012

P/E 19.5 (103.1) 22.2 15.2 14.7

P/B 1.3 1.8 2.0 1.6 1.9

P/S 0.5 0.8 0.8 0.6 0.7

P/FCF 5.5 9.8 7.7 6.3 6.6

Dividend Yield %

0.67 0.53 0.51 0.61 0.60

Current Price Fair Value 52 Wk Range $91.72 $112.00 $83.51-91.72 Business Summary: FedEx Corporation intends to continue leveraging and extending the FedEx brand and providing its customers with convenient, seamless access to its entire portfolio of integrated services. Investment Rationale/Risk

FedEx’s massive and international shipping network is extremely difficult and expensive to replicate, giving them competitive advantage in the industry.

Rapid expansion of their FedEx Underground segment, lead to increased market share and boost margins.

Consistent dividend. Relatively undervalued compared to peers.


Current year % (7.50) 8.00

Next year % 25.20 18.40

Past 5 years % 1.30 3.40

Next 5 years % 12.00 9.50


ROE %

United Parcel Service Inc. (UPS) 3.85 13.81

United States Postal Service (private)

-- --

DHL International GmbH (private)

-- --



HOLD Intel Corp. (NASDAQ: INTC) Analyst: Peter Rosenberger Sector: Technology Stock Type: Large Value MKT CAP: $107.97B Holding Return: -3.83% Industry: Semiconductors Morning Star Rating: ****


2008 2009 2010 2011 2012 Ind. (2012)

Total Return % (42.46) 42.97 6.18 19.03 (11.38) 6.54

Return on Assets %

9.95 8.42 19.72 19.72 14.16 3.11

Return on Equity %

12.93 10.82 25.16 27.15 22.66 1.49

Net Margin % 14.08 12.44 26.28 23.97 20.63 3.31

Asset Turnover 0.71 0.68 0.75 0.80 0.69 0.83

Financial Leverage

1.30 1.27 1.28 1.55 1.65 0.48

Operating Margin %

23.8 16.3 35.7 32.4 27.44 5.43


(1.95) (6.54) 24.19 23.79 (1.22) 4.85


8.98 (36.22) 172.95 12.12 (16.24) (29.06)

EPS Growth % (22.03) (16.30) 161.04 18.91 (10.88) (5.83)

Current Ratio 2.54 2.79 3.39 2.15 2.43 3.22

Valuation Analysis

2008 2009 2010 2011 2012

P/E 15.9 26.5 10.5 10.1 28.22

P/B 2.1 2.7 2.3 2.7 1.64

P/S 2.2 3.3 2.7 2.5 1.71

P/FCF 7.7 10.3 7.2 6.4 170.09

Dividend Yield %

3.73 2.75 3.00 3.23 4.22

Current Price Fair Value 52 Wk Range $20.62 $26.00 $19.36-$29.18 Business Summary: Intel Corporation designs manufactures, and sells integrated digital technology platforms for industries such as computing and communications. A platform is defined as integrated suites of digital computing technologies that are designed and configured to work together to provide an optimized user computing solution. Intel has collaboration with ZTE Corporation focusing on the Intel Atom Processor platform. Intel is also the world’s largest manufacturer of semiconductor technology. The Company sells its products primarily to original equipment manufacturers, original design manufacturers, PC and network communications products users, and other manufacturers of industrial and communications equipment. Investment Rationale/Risk:

Intel has partnered with Altera which will create increased manufacturing volumes and assist to maintain the most advanced semiconductor fabrication technology in the world.

Intel holds a dominant footprint in the computer processor market and at the world’s largest semiconductor company, Intel developed a massive research and development budget compared to its competitors.

The maturation of the current PC market will provide an obstacle for Intel due to posing challenges in growth opportunities. Also the emergence of the competitor ARM, which producers processors for most smartphones and tablets


Current year % (10.80) (6.60)

Next year % 7.90 18.70

Past 5 years % 16.50 (3.90)

Next 5 years % 9.90 10.80

Peers Return

(2012) % ROE %

Texas Instruments (TXN) 8.59 16.05

Broadcom (BRCM) 14.48 10.01

NVIDIA Corp. (NVDA) (11.00) 15.86



HOLD The Coca-Cola Company (NYSE: KO) Analyst: Cameron Forrey Sector: Consumer Staples Stock Type: Large Blend MKT CAP: $173B Holding Return: 66.39% Beverages- Soft Drinks Morning Star Rating: ***


2008 2009 2010 2011 2012 Ind. (2012)

Total Return % 23.76 29.53 18.47 9.24 3.62 11.74

Return on Assets %

16.86 15.30 19.42 11.21 10.86 5.26

Return on Equity %

27.51 30.15 42.32 27.37 28.00 10.20

Net Margin % 18.18 20.02 33.63 18.42 18.78 5.11

Asset Turnover .76 .69 .58 .61 .58 1.37

Financial Leverage

1.98 1.96 2.35 2.53 2.63 2.96

Operating Margin %

26.44 26.56 24.06 21.82 22.45 7.31


10.70 (2.99) 13.32 32.53 3.17 7.01


16.46 (2.55) 2.65 20.18 6.16 7.29

EPS Growth % (3.11) 117.67 72.70 (27.08) 6.78 9.13

Current Ratio .94 1.28 1.17 1.05 1.09 1.91

Valuation Analysis

2008 2009 2010 2011 2012

P/E 18.2 19.5 13.0 19.0 18.4

P/B 5.1 5.3 4.9 5.0 4.9

P/S 3.3 4.3 4.4 3.5 3.5

P/FCF 14.0 16.2 16.1 17.2 15.6

Dividend Yield %

3.36 2.88 2.68 2.69 2.81

Current Price Fair Value 52 Wk Range $36.25 $38.00 $33.28-$40.67 Business Summary: The Coca-Cola Company, a beverage company, engages in the manufacture, marketing, and sale of nonalcoholic beverages worldwide. The company primarily offers sparkling beverages and still beverages. Its sparkling beverages include nonalcoholic ready-to-drink beverages with carbonation, such as carbonated energy drinks, and carbonated waters and flavored waters. The Coca-Cola Company sells its products primarily under the Coca-Cola, Diet Coke, Coca-Cola Light, Coca-Cola Zero, Sprite, Fanta, Minute Maid, Powerade, Aquarius, Dasani, Glacéau Vitaminwater, Georgia, Simply, Del Valle, Ayataka, and I Lohas brand names. Investment Rationale/Risk

Coke has potential for runway for growth in emerging markets where per-capita consumption is relatively low.

Coke's revenue base is relatively undiversified compared with PepsiCo's, whose snack business has proved strong during economic downturns.

Stable during economic downturns.



Next year % 8.9 5.50

Past 5 years % 8.19 8.75

Next 5 years % 8.95 12.98


ROE %

PepsiCo Inc. (PEP) 6.34 28.65

Dr. Pepper Snapple (DPS) 15.35 27.69

Monster Beverage Corporation (MNST)

14.70 41.89



HOLD Lowes Companies Inc. (NYSE: LOW) Analyst: Robert Watson Sector: Consumer Discretionary Stock Type: Large Growth MKT CAP: $43.2B Holding Return: 63.92% Home Improvement Stores Morning Star Rating: ***


2008 2009 2010 2011 2012 Ind. (2012)

Total Return % (3.40) 10.32 8.94 3.19 42.32 32.25

Return on Assets %

9.58 6.91 5.43 6.03 5.91 5.11

Return on Equity %

17.65 12.85 9.61 10.81 10.62 10.73

Net Margin % 5.82 4.55 3.78 4.12 3.66 3.87

Asset Turnover 1.65 1.52 1.44 1.46 1.49 1.32

Financial Leverage

1.92 1.81 1.73 1.86 2.03 1.87

Operating Margin %

9.74 7.85 6.59 7.29 6.53 6.50


2.89 (0.11) (2.09) 3.38 2.85 1.00


(8.68) (19.53) (17.80) 14.40 (7.95) 5.90

EPS Growth % (6.53) (19.89) (18.79) 17.36 0.00 13.00

Current Ratio 1.12 1.15 1.32 1.40 1.27 1.17

Valuation Analysis

2008 2009 2010 2011 2012

P/E 13.0 19.8 18.6 18.4 21.1

P/B 1.8 1.8 1.8 1.9 2.8

P/S .7 .7 .7 .7 .8

P/FCF 6.5 8.3 10.2 8.5 10.6

Dividend Yield %

1.53 1.50 1.59 1.97 1.69

Current Price Fair Value 52 Wk Range $35.52 $37.00 $24.84-36.09 Business Summary: Lowes is the second largest home-improvement retailer in the world and has 1,750 stores in the U.S., Canada, and Mexico. The stores stock 14 product categories including appliances and tools, paint, lumber, and nursery. Lowes has a superior distribution network and a cutting edge logistics system that allows them to make large-scale purchase orders at a discount. Investment Rationale/Risk

Strong comparable store sales in 4Q2012 indicating strong uptrend.

Expect continued growth stimulated by a rebounding housing market.

Consistent dividend. Relatively undervalued compared to peers.



Next year % 21.10 18.30

Past 5 years % 5.44 (9.62)

Next 5 years % 17.50 12.11


ROE %

Home Depot (HD) 49.88 21.11

Kingfisher PLC (KGFHY) 20.16 11.44

Rona Inc. (RONAF) 16.65 0.92



HOLD 3M Co. (NYSE: MMM) Analyst: Caitlin Guindon Sector: Industrials Stock Type: Large Core MKT CAP: $72.6 Holding Return: 96.5% Diversified Industrials Morning Star Rating: ****


2008 2009 2010 2011 2012 Ind. (2012)

Total Return % (29.39) 47.22 6.93 (2.75) 16.49 20.17

Return on Assets %

13.77 12.10 14.23 13.87 13.57 2.22

Return on Equity %

32.00 28.20 28.74 27.56 26.94 9.59

Net Margin % 13.69 13.81 15.32 14.46 14.86 3.09

Asset Turnover 1.01 0.88 0.93 0.96 0.91 0.75

Financial Leverage

2.59 2.13 1.93 2.05 1.93 2.87

Operating Margin %

20.6 20.8 22.2 20.9 21.7 3.66


3.30 (8.49) 15.31 11.06 -- 0.81


(15.74) (7.74) 22.93 4.39 -- 67.57

EPS Growth % (12.86) (7.57) 24.56 5.86 6.04 (2.71)

Current Ratio 1.64 2.20 2.01 2.25 2.20 1.24

Valuation Analysis

2008 2009 2010 2011 2012

P/E 11.8 18.3 15.3 13.7 14.7

P/B 4.0 4.6 3.9 3.7 3.6

P/S 1.6 2.5 2.3 2.0 2.2

P/FCF 9.0 11.8 12.1 11.2 12.3

Dividend Yield %

3.48 2.47 2.43 2.69 2.54

Current Price Fair Value 52 Wk Range $92.85 $100.50 $81.98-106.88 Business Summary: 3M has invented some of the world's greatest products. We think the firm's innovative culture, bottom-line focus, and low-cost manufacturing have carved a wide moat around its business that will enable it to reap oversize rewards over the long run. That said, the company tends to feel the pinch of economic slowdowns relatively early, and near-term headwinds could crimp the firm's growth for several quarters. Investment Rationale/Risk

History of raising dividends. Operating margin best among peers. Outperformed industry during economic crisis. Recently acquired certification for CNG Tank (Compressed

natural gas). 3M and Chesapeake Energy will collaborate in design and

manufacturing marketing brand of CNG. Has nearly $4B in free cash flow to pursue acquisitions.



Next year % 9.70 28.70

Past 5 years % 6.59 --

Next 5 years % 10.37 14.49


ROE %

Siemens Aktiengesellschaft (SI) 17.47 14.32

Jardine Matheson Holdings Limited (JARB)

34.47 9.69

Adani Enterprises Limited (XNSE) (7.36) --



HOLD Microsoft Corp. (NASDAQ: MSFT) Analyst: Lance Shifflett Sector: Technology Stock Type: Large Value MKT CAP: $235.9B Holding Return: 9.06% Industry: Software Infrastructure Morning Star Rating: ***


2008 2009 2010 2011 2012 Ind. (2012)

Total Return % (44.10) 59.47 (6.63) (4.55) 6.09 15.03

Return on Assets %

26.01 19.34 22.88 23.77 17.77 9.25

Return on Equity %

52.48 38.42 43.76 44.84 27.51 16.70

Net Margin % 29.26 24.93 30.02 33.10 23.03 13.46

Asset Turnover 0.89 0.78 0.76 0.72 0.64 0.60

Financial Leverage

2.01 1.97 1.86 1.90 1.83 1.81

Operating Margin %

37.2 34.8 38.6 38.8 29.5 20.01


18.19 (3.28) 6.93 11.94 5.40 9.91


21.42 (9.47) 18.34 12.71 (19.87) 8.52

EPS Growth % 31.69 (13.37) 29.63 28.10 (25.65) 6.41

Current Ratio 1.45 1.82 2.13 2.60 2.60 1.80

Valuation Analysis

2008 2009 2010 2011 2012

P/E 10.4 16.8 11.9 9.4 15.49

P/B 5.0 6.1 4.8 3.7 3.26

P/S 2.9 4.7 3.7 3.1 3.24

P/FCF 8.8 13.0 9.6 8.1 11.45

Dividend Yield %

2.37 1.71 1.97 2.62 3.09

Current Price Fair Value 52 Wk Range $26.71 $35.00 $26.22-32.95 Business Summary: Microsoft Corporation develops, licenses, manufactures, and supports a range of software products and services for different types of computing devices. They also design and sell hardware worldwide as well as online advertising to its customers. The company operates in five segments, which are Windows and Windows Live division, server and tools, online services, entertainment, and Microsoft business division. Their products include Windows 8 operating system, Microsoft office, windows phone, Xbox 360, Skype, and their recent release of their tablet, the Surface. Investment Rationale/Risk

Microsoft’s cash on hand as well as their dividend yield has been steadily increasing year after year.

Microsoft’s Windows operating system and Microsoft Office has built a strong footprint in the market with its high use in education institutions and businesses.

Although Microsoft recently moved in to the phone and tablet markets, we are concerned they will not see the gains they are hoping for due to the amount of competition in those fields.



Next year % 11.60 20.90

Past 5 years % 12.40 11.70

Next 5 years % 9.90 18.70


ROE %

Oracle Corp.(ORCL) 31.54 23.92

VMware Inc.(VMW) 13.16 14.19

Citrix Systems Inc.(CTXS) 8.07 12.05



HOLD Annaly Capital Management, Inc. (NYSE: NLY) Analyst: Nnaemeka Okoro Sector: Financial Services Stock Type: Large Value CAP: $14.8Bil Holding Return: (14.55) % REIT - Diversified Morning Star Rating: ***


2008 2009 2010 2011 2012 Ind. (2012)

Total Return % (1.27) 25.33 18.56 2.68 0.81 20.55

Return on Assets %

0.58 3.06 1.64 0.34 1.40 3.16

Return on Equity %

5.40 23.72 13.11 2.59 11.09 5.19

Net Margin % 26.09 91.30 84.89 51.21 82.06 23.28

Asset Turnover 0.02 0.03 0.02 0.01 0.02 0.15

Financial Leverage

8.22 7.40 8.57 7.04 8.89 3.39

Operating Margin %

29.9 93.8 88.3 62.9 88.61 21.93


154.11 70.83 (30.85) (56.53) -- 55.84


(12.19) 436.28 (34.88) (69.04) -- 300.42

EPS Growth % (51.15) 450.0 (42.05) (81.86) 362.16 137.48

Current Ratio -- -- -- -- -- 0.66

Valuation Analysis

2008 2009 2010 2011 2012

P/E 24.8 4.9 8.8 43.1 8.2

P/B 1.2 1.0 1.2 1.0 0.9

P/S 6.5 4.5 7.6 20.6 6.8

P/FCF 7.3 0.9 1.0 5.4 1.8

Dividend Yield %

13.11 14.64 14.79 15.29 12.7

Current Price Fair Value 52 Wk Range $14.04 $18.00 $14.01-$17.75 Business Summary: Annaly Capital Management, Inc., owns, manages, and finances real estate related investments, including mortgage pass-through certificates, collateralized mortgage obligations, Agency callable debentures, and other securities. Investment Rationale/Risk

Great dividend payout. Low volatility in the market. Strong management. Increasing returns over last 3 years.


Current year % (29.80) (6.40)

Next year % (0.20) 10.20

Past 5 years % 9.20 17.80

Next 5 years % (6.70) 3.00

Peers Return

(2012) % ROE %

American Tower Corp (AMT) 31.39 18.58

Vornado Realty Trust (VNO) 1.71 9.62

W. P. Carey Inc. (WPC) 25.21 4.65



HOLD Novartis AG ADR (NYSE: NVS) Analyst: Rachael Kocher Market Cap: 164.24billion Stock Type: Large Blend Sector: Healthcare Services Holding Return: 34.41% Drug Manufacturers-Major Morning Star Rating: *****

Valuation Analysis

2008 2009 2010 2011 2012

P/E 14.0 14.7 13.8 15.1 16.3

P/B 2.2 2.2 2.1 2.1 2.2

P/S 2.7 2.7 2.6 2.3 2.7

P/FCF 11.8 10.1 9.6 9.5 10.9

Current Price Fair Value 52 Wk Range $67.82 $69.00 $51.20-68.43 Business Summary: Novartis develops and manufactures healthcare products within its five main operating segments: branded pharmaceuticals, generic pharmaceuticals, diagnostic and vaccines, eye care, and consumer products. Investment Rationale/Risk

Leads the industry with ROA, ROE, margins, revenue, and EPS growth all well above the industry averages

The company expected that in the next 12-18 months they would bring a wave of blockbuster drugs to market.


Current year % (6.5) 0

Next year % (1.2) 3.4

Past 5 years % 14.3 8.8

Next 5 years % 4.6 6.2


ROE %

Merck (MRK) 7.33 11.47

Bristol Meyers (BMY) 9.46 13.24

Eli Lilly (LLY) 16.12 28.89


2008 2009 2010 2011 2012 Ind. (2012)

Total Return % 14.10 12.29 11.68 9.83 10.16 7.95

Return on Assets %

10.66 9.67 8.95 7.57 7.86 9.35

Return on Equity %

16.47 15.60 16.24 14.12 14.09 23.31

Net Margin % 19.24 18.62 19.00 15.35 16.51 14.95

Asset Turnover .55 .52 .47 .49 .48 .63

Financial Leverage

1.56 1.66 1.95 1.78 1.8 2.52

Operating Margin %

21.2 22.1 22.4 18.5 20.0 20.28


11.85 .92 4.32 5.15 -- 4.43

Operating Income %

32.19 11.36 15.47 -4.58 -- 15.98

EPS Growth % (30.02) .79 5.45 11.27 .91 --



HOLD Procter & Gamble Company (NYSE: PG) Analyst: Cameron Forrey Sector: Consumer Staples Stock Type: Large Blend MKT CAP: $211B Holding Return: 174.46% Household & Personal Products Morning Star Rating: **


2008 2009 2010 2011 2012 Ind. (2012)

Total Return % 13.69 .86 9.21 6.90 5.08 6.99

Return on Assets %

8.44 9.50 9.52 8.68 7.95 2.75

Return on Equity %

17.83 20.39 20.89 18.32 16.72 4.96

Net Margin % 14.25 16.76 15.86 14.01 12.85 10.58

Asset Turnover .59 .57 .60 .62 .62 .37

Financial Leverage

2.11 2.18 2.14 2.08 2.12 3.98

Operating Margin %

20.5 20.4 20.3 19.2 15.9 13.49


9.19 (5.36) (.12) 4.59 1.36 2.20


16.61 10.57 (5.62) (1.27) (15.97) 5.86

EPS Growth % 19.74 17.03 (3.52) (4.38) (6.87) 4.47

Current Ratio .79 .71 .77 .81 .88 .66

Valuation Analysis

2008 2009 2010 2011 2012

P/E 14.5 16.6 17.9 20.1 17.4

P/B 3.0 2.6 2.9 2.9 2.8

P/S 2.4 2.4 2.5 2.3 2.4

P/FCF 14.2 11.0 14.5 14.9 13.8

Dividend Yield %

2.51 2.84 2.93 3.08 3.26

Current Price Fair Value 52 Wk Range $67.89 $70.00 $59.07-$70.99 Business Summary: Procter & Gamble Company is a focused primarily on consumer packaged goods in the U.S. and throughout 180 countries. Their products are sold through mass merchandisers, grocery stores, membership club stores, and drug stores. The brands include 50 leadership brands that are among the world’s most well-known household names. These 50 brands represent about 90% of the sales and profits. As of June 2012, P&G was organized into two Global Business Units (GBUs): Beauty and Grooming, and Household Care. In June 2012, P&G announced the sale of Pringles to the Kellogg Company Investment Rationale/Risk

During the spring 2013 semester, the class should look to reevaluate the stock to see if there is a possibility to sell.

Announced $10 billion cut of the cost structure, which is to be done over the next several years.

Portfolio of leading brands across personal care and household products.



Next year % 7.60 9.40

Past 5 years % 7.0 9.8

Next 5 years % 7.80 14.29


ROE %

Kimberly-Clark Corp. (KMB) 18.80 34.20

Johnson & Johnson (JNJ) 10.55 17.81

Avon Products Inc. (AVP) (13.51) (3.05)



HOLD Snap-on Inc (NYSE: SNA) Analyst: Joshua Rakvin Sector: Industrials Stock Type: Mid Blend MKT CAP: $4.8B Holding Return: 56.05% Tools & Accessories Morning Star Rating: ****


2008 2009 2010 2011 2012 Ind. (2012)

Total Return % (15.88) 10.36 36.77 (8.24) 58.81 28.00

Return on Assets %

8.65 4.36 5.20 7.47 8.08 7.66

Return on Equity %

19.19 10.84 13.93 18.93 18.37 11.03

Net Margin % 8.30 5.68 7.12 9.68 10.42 12.88

Asset Turnover 1.04 0.77 0.73 0.77 0.78 0.75

Financial Leverage

2.28 2.67 2.69 2.40 2.17 --

Operating Margin %

13.63 10.61 12.65 16.65 17.20 17.84


0.43 (17.20) 10.87 8.97 2.94 4.54

Operating Income %(yoy) Growth % (yoy)

19.70 -35.52 32.19 43.36 8.63 --

EPS Growth % 31.72 (43.00) 37.50 47.65 10.40 1.13

Current Ratio 2.08 2.27 2.00 2.62 2.83 4.25

Valuation Analysis

2008 2009 2010 2011 2012

P/E 9.7 18.2 17.7 10.8 15.2

P/B 1.9 1.9 2.4 1.9 2.6

P/S 0.8 1.0 1.3 1.0 1.6

P/FCF 10.6 7.0 23.5 23.1 14.1

Dividend Yield %

3.05 2.84 2.16 2.57 1.77

Current Price Fair Value 52 Wk Range $78.99 $95.00 $51.24-78.99 Business Summary: Snap-on is a manufacturer and marketer of tools, equipment, diagnostics, repair information and systems applications. Snap-on products and services include hand and power tools, tool storage, diagnostic software, information and management systems, shop equipment and other applications for vehicle dealerships and repair centers, as well as for customers in industries, including aviation and aerospace, agriculture, construction, government and military, mining, natural resources, power generation and technical education. Investment Rationale/Risk

Leading premium supplier of professional tools. Expected recovery in housing sector could lead to an

increase in housing construction, in turn an increase in sales.

Slow declining dividend yield. Has had trouble with organizational complacency in the

past few years.



Next year % 10.60 13.00

Past 5 years % 10.60 8.40

Next 5 years % 10.00 10.00

Peers Return

(2012) % ROE %

Danaher Corp. (DHR) 19.05 13.32

The Home Depot, Inc. (HD) 49.88 21.11

Stanley Black & Decker, Inc. (SWK)

12.09 12.93



BUY Toronto-Dominion Bank (NYSE: TD) Analyst: Nnaemeka Okoro Financial Services Stock Type: Large Blend CAP: $76.1Bil Holding Return: 0.84% Toronto-Dominion Bank Morning Star Rating: ***


2008 2009 2010 2011 2012 Ind. (2012)

Total Return % (45.42) 80.66 22.25 4.21 16.59 36.56

Return on Assets %

0.77 0.53 0.76 0.87 0.82 0.47

Return on Equity %

14.87 9.07 11.99 13.86 14.09 8.04

Net Margin %

25.20 16.53 22.74 26.44 26.69 19.39

Asset Turnover 0.03 0.03 0.03 0.03 0.03 0.03

Financial Leverage

18.90 15.77 15.92 15.79 18.38 16.05

Operating Margin %

29.46 17.74 29.53 32.63 31.70 16.73


2.83 19.25 9.55 10.7 -- 15.07


(10.76) (28.17) 82.30 21.97 -- (28.93)

EPS Growth % (11.13) (28.75) 46.97 25.69 5.46 (19.05)

Current Ratio -- -- -- -- -- --

Valuation Analysis

2008 2009 2010 2011 2012

P/E 9.0 18.9 14.6 11.9 12.4

P/B 1.2 1.6 1.9 1.8 1.7

P/S 2.3 3.1 3.3 3.1 3.3

P/FCF 1.7 2.3 20.0 (89.3) 5.5

Dividend Yield %

3.6 3.6 3.6 3.6 3.6

Current Price Fair Value 52 Wk Range $84.33 $89.00 $75.62-84.33 Business Summary: Toronto-Dominion Bank and its subsidiaries provide Canadian Personal and Commercial Banking, U.S. Personal and Commercial Banking, Wealth Management, Insurance and Wholesale Banking. Investment Rationale/Risk

Waste Management continues to be a leader in their industry.

New technologies in recycling programs have allowed. Waste Management to expand and diversify their services.

Future growth is expected to be very minimal. Government regulations and restrictions on landfill space

can greatly impact this company negatively.



Next year % 7.60 6.70

Past 5 years % 9.90 3.40

Next 5 years % 12.00 10.50

Peers Return

(2012) % ROE %

JPMorgan Chase & Co. (JPM) 25.70 10.72

Citigroup Inc. (C) 39.64 4.14

Credit Suisse Group (CS) (0.04) 3.90



HOLD UnitedHealth Group Inc. (NYSE: UNH) Analyst: Rachael Kocher Market Cap: 58.07B Stock Type: Large Blend Sector: Healthcare Services Holding Return: (2.77%) Healthcare Plans Morning Star Rating: ****


2008 2009 2010 2011 2012 Ind. (2012)

Total Return % 7.94 10.12 12.08 12.53 11.34 3.81

Return on Assets %

5.58 6.66 7.59 7.85 7.43 6.37

Return on Equity %

14.58 17.22 18.75 19.00 18.58 15.02

Net Margin % 3.67 4.39 4.92 5.05 5.00 3.94

Asset Turnover 1.52 1.52 1.54 1.56 1.49 1.79

Financial Leverage

2.69 2.50 2.44 2.40 2.59 3.22

Operating Margin %

6.5 7.3 8.4 8.3 8.4 6.56

Revenue Growth %(yoy)

7.63 7.33 8.05 8.19 -- 123.39

Operating Income %

(32.95) 20.82 23.67 7.63 -- 61.04

EPS Growth % (29.82) 35.00 26.54 15.37 11.63 1.99

Valuation Analysis

2008 2009 2010 2011 2012

P/E 11.1 9.4 8.8 10.7 10.3

P/B 1.5 1.5 1.5 1.9 1.8

P/S .4 .4 .4 .5 .5

P/FCF 7.8 6.4 6.5 8.0 7.9

Current Price Fair Value 52 Wk Range $55.66 $65.00 $50.32-60.75 Business Summary UnitedHealth Group Incorporated operates as a diversified health and well-being company in the United States. The company’s UnitedHealthcare segment offers consumer-oriented health benefit plans and services to national employers, public sector employers, mid-sized employers, small businesses, and individuals; health and well-being services to individuals age 50 and older. Investment Rationale/Risk

Undervalued [Intrinsic Value > Current Price: $70.78 > $53.61]

Good Financials ($110.6B Revenue, $6.1B FCF). Competitive Advantage (new international segment,

industry-leading position) Good Growth Rates (EPS up 11.6% and Revenue up 9%

from last year) Good Dividends ($800m in Div.)



Next year % 9.5 10.5

Past 5 years % 16.3 7.1

Next 5 years % 10.5 9..8


ROE %

WellPoint Inc. (WLP) -6.23 11.28

Express Scripts (ESRX) 20.83 10.15

Cigna (CI) 27.38 17.92



SELL Valero Corp. (NYSE: VLO) Sold 2/21/2013 Analyst: Greg Campbell Sector: Energy Stock Type: Large Value MKT CAP: $24.5(B) Holding Return: 102.31% Oil, Gas Refining Morning Star Rating: **


2008 2009 2010 2011 2012 Ind. (2012)

Total Return % (68.29) (19.82) 39.22 (7.66) 65.18 100.96

Return on Assets %

(2.93) (5.66) .88 5.20 4.77 11.98

Return on Equity %

(6.63) (13.06) 2.18 13.29 12.09 24.73

Net Margin %

(.95) (2.91) .39 1.66 1.50 5.43

Asset Turnover 3.09 1.95 2.25 3.13 3.19 2.58

Financial Leverage

2.2 2.42 2.5 2.61 2.47 2.12

Operating Margin %

.5 (.1) 2.3 2.9 2.9 9.35


24.95 (42.79) 20.68 53.21 -- 66.37

Operating Income %

(91.86) -- -- 96.16 -- 203.07

EPS Growth %

-- -- -- 545.61 1.9 34.17

Current Ratio

1.52 1.4 1.54 1.26 1.38 2.16

Valuation Analysis

2008 2009 2010 2011 2012

P/E (10.0) (25.8) 14.3 5.7 9.1

P/B .7 .6 .9 .7 1.0

P/S .1 .1 .2 .1 .1

P/FCF 3.8 5.0 4.3 3.0 3.6

Dividend Yield %

.57 .6 .2 .3 .65

Current Price Fair Value 52 Wk Range $32.97 $35.00 $20.00-48.97 Business Summary: Valero is in the business of crude oil extraction, where in it uses superior refinement technology to turn low-grade feedstock and crude oil into high-grade products; from which it is able to obtain high premium returns from. Along with these main products, VLO also produces gasoline, distillates, jet fuel, asphalt, petro-chemicals, and lubricants. Investment Rationale/Risk

Valero is able to deliver high premiums on their crude oil products with industry leading margins.

Valero does not need to pay high costs on prime land, which allows them to buy up remote spots with untapped sources of supply.

Valero has high amounts of reserves, which combined with the rest of their operations is subject to devaluation from a slowing global.

VLO is exposed to the growing global trend of alternative energy, which they do not have in their portfolio.



Next year % (3.3) 2.9

Past 5 years % (4.5) (.4)

Next 5 years % 7.60 13.00


ROE %

Tesoro Corp. (TSO) 89.73 18.77

Hollyfrontier Corp. (HFC) 112.18 30.69



HOLD Vulcan Material Company (NYSE: VMC) Analyst: Xin Xin Cheng Sector: Basic Material Stock Type: Mid Blend MKT CAP: $7.0B Holding Return: 14.63% Building Material Morning Star Rating: ****


2008 2009 2010 2011 2012 Ind. (2012)

Total Return % (9.55) (22.18) (13.88) (9.58) 32.38 47.80

Return on Assets %

(0.05)

john l. grove college of business investment management … · 2017. 9. 14. · 2012 annual report....

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